WA charge secures Lanco debt

The Office of State Revenue in Western Australia has moved to secure money it is owed by registering a charge over some of the state’s biggest coal assets in the latest sign of financial stress for the Indian owner of
Griffin Coal
.

The details of the charge, obtained by The Australian Financial Review, show that the energy company
Lanco Infratech,
with its headquarters in New Delhi, owes an undisclosed sum to the OSR for “landholder duty".

Instead of paying the money ­up-front, Lanco has negotiated an instalment payment arrangement with the office, which resulted in a charge, a form of security, over the coal mining leases to enforce the payments.

Griffin company secretary and chief financial officer
James Riordan
would not disclose the size of the debt. “This is less of a cash flow pressure issue, but more of a cash flow management ­matter," he said. The payment arrangement was agreed with both parties prior to the debt being due, he said.

Lanco bought the coal assets in ­Collie, south-east of Perth, in late 2010 for $750 million from adminis­trators of the coal empire formerly controlled by reclusive tycoon
Ric Stowe
. The operations have been hindered by inherited coal ­contracts and high production costs, which Lanco is trying to overcome by pursuing a large export program that’s so far proved a problem.

Last year, the Financial Review revealed that Griffin was at imminent risk of being wound up due to insolv­ency concerns after Lanco failed to pay a $13.9 million debt to the Australian Taxation Office.

Lanco’s precarious position has political and workforce ramifications in WA: several hundred people are employed at the coal operations and the mined coal supplies the nearby Bluewaters Power Station, the big energy generator in the region.

A successful export program is seen as the most obvious way to make the mine profitable, although Griffin’s plans to expand coal production and exports are strongly opposed by conservationists.